Iran has halted its most sensitive nuclear activity under a deal with world powers, according to a confidential UN atomic agency report.

The International Atomic Energy Agency also said Iran had begun diluting its stockpile of uranium enriched to the fissile concentration of 20% - a level that took it closer to the capability of producing fuel for an atom bomb.

Iranian state television said Iran had suspended 20% enrichment at the Natanz plant and that inspectors were heading to its other enrichment plant at Fordow.

The IAEA report also listed other measures Iran had agreed to under the interim accord with the six world powers - the United States, France, Britain, Germany, China and Russia.

Those included an undertaking that Iran would not build any more enrichment sites during the six-month agreement.

This step is meant to buy time for negotiations on a final settlement of Iran's decade-old nuclear dispute with the six powers.

Tánaiste and Minister for Foreign Affairs Eamon Gilmore said the EU had imposed sanctions in an attempt to force Iran into "serious engagement" about its nuclear programme.

He said today's developments were good news and he was hopeful the upcoming six months of talks would be successful.

Enriched uranium can have both military and civilian purposes.

Iran denies Western allegations that it has been seeking to develop the capability to make nuclear bombs, saying it wants only civilian atomic energy.

The IAEA report to member states said: "The Agency confirms that, as of 20 January 2014, Iran ... has ceased enriching uranium above 5%  U-235 at the two cascades at the Pilot Fuel Enrichment Plant (PFEP) and four cascades at the Fordow Fuel Enrichment Plant (FFEP) previously used for this purpose."

It was referring to Iran's two enrichment plants at Natanz and Fordow.

Cascades are interlinked networks of centrifuge machines that enrich uranium.